pan european building and infrastructure conference slides · singapore and the us active investor...

Bank of America Merrill Lynch Pan European Building & Infrastructure Conference

6 October 2010

1Creation and Care of Essential Assets

Agenda

Overview of the Group

Infrastructure markets

Balfour Beatty infrastructure business model

Opportunities across the Group

Longer-term direction of the Group


Integrated business model

Professional services

25%

Constructionservices

30%

Support services

15%

Infrastructure investments

30%

Notes: Balfour Beatty analysis – illustrative allocation of value by segment

International infrastructure business

Strong and self-sufficient divisions

Each separately world-class

Together, offering infrastructure owners a uniquely integrated service

Particularly relevant to the largest, most complex and highest value projects


Providing services across the infrastructure lifecycle

StrategicConsultancy

Finance Programme Mgt

Design Construct Systems Integration

Operate Maintain


Construction services

Support services



In diverse end-markets and geographies

Road19%

Rail17%

Aviation2%

Power8%Water

3%Education

12%

Healthcare7%

Social & military housing

4%

Defence6%

Facilities management

5%

Commerical building

8%

Other9%

Notes: For half-year ended 26 June 2010, breakdown of revenue including share of joint ventures and associates

UK55%

USA30%

RoW15%


Strong track record

10.3

Revenue incl. joint ventures & associates

£10.3bn +9%

4.6

2005

5.5

2006

7.5

2007

9.5

2008 2009

£bn

Pre-tax profit£267m +7%

117

2005

136

2006

201

2007

249

2008

267

2009

£m

2009

Dividend growth

7.1p7.9p

10.0p11.1p

12.0p +8%12.0p

Order book

7.6

2005

9.1

2006

11.4

2007

12.8

2008 2009

£14.1bn +10%14.1£bn

10.3

2006

34.7p

21.0p

Adjusted eps

34.7p34.5p 34.7p

21.0p

30.5p

34.7p

23.8p

34.7p

2005 2006 2007 2008 2009 2005 2006 2007 2008 2009


Infrastructure – an attractive, long-term market

Developed world• Ageing infrastructure• Demographic changes• De-carbonisation

Projected infrastructure spending 2009-2020 trillion $US

Global growth in infrastructure spend forecast to exceed GDP growth over next 11 years

Global spend CAGR

7.7%

Developing world• Engine of economic growth• Population growth• Demographic changes/urbanisation

16.7

6.54.7

3.3

2.7

2.4

The circles are illustrative of relative spend in 2009-2020Source: IHS Global Insight, Global Construction Outlook 2010 Q3-10


Infrastructure business model



Revenue1

£829m

Order book£1.6bn

Profit2

£49m

Share in Group revenue1

16%

Programme and project management

Architectural services

Project design

Technical services

Planning

Consultancy

Notes: For Half-year ended 26 June 2010, 1 Revenue including share of joint ventures and associates, 2 Profit from operations before exceptional items and amortisation


US9% UK

3%RoW4%


Professional services - a knowledge business

StrategicConsultancy

Programme Mgt

Design Systems Integration

Business drivers• Track record and staff

qualifications key factor in winning work

• Staff utilisation and multipliers: ‘billability’ drives profitability

• Mostly fee-based, limited risk

Strategic themes• Capability enhancement

(power, water, mining, rail)• Truly global footprint• Geographic expansion(Canada, India, China)

• Process integration


Revenue1

£3,282m

Order book£8.5bn

Profit2

£83m


63%

Building

Construction management

Refurbishment and fit-out

Mechanical and electrical services

Civil engineering

Ground engineering

Rail engineering

Construction services



UK33%

US20%

RoW10%


Construction services - a delivery business

Business drivers• Integration of supply chain• Local capability• Project and commercial

management skills• Delivery focus: cost and

schedule• Risk management• Low operational gearing

Strategic themes• Growth in established geographies

• US• HongKong/South-East Asia

• Specific opportunities• UK power – nuclear, renewable

energy• HK infrastructure• US federal

Construct


Support services

Revenue1

£735m

Order book£4.5bn

Profit2

£21m


14%

Upgrade and maintenance of water, gas and electricity works

Total facilities management and business services outsourcing (BSO)

Highways network management, operation and maintenance

Rail renewals

Highways & rail

renewals 37%

BSO & FM 28%

Power26%


Highways mgt and rail

renewals37%


Water1% Power

Highway mgt & rail

renewals 5%4%

BSO + FM4%


Support services – a service business

Business drivers• Continuous improvement:

quality enhancement and cost reduction

• Contract renewal and scope expansion

• Intimate contact with client organisation

Strategic themes• Growth in Total Facilities

Management market share• Capitalise on growth in UK

outsourcing• UK power opportunities

Operate Maintain



Revenue1

£352m

No.of concessions55

Profit2

£14m


7%

Operate a portfolio of long-term PPP concessions in the UK, primarily in the education, health and road/street lighting sectors

Operate a portfolio of long-term military accommodation PPP concessions in the US

Operate education PPP concessions in Singapore and the US

Active investor in non-PPP assets at Blackpool and Exeter International airports and Barking Power Station, and preferred bidder in OFTO



Infrastructure investments – an asset owner

Business drivers• Capital intensive business;

ROE-based• Whole life cost optimisation• PPP (availability risk) v asset

investment (demand risk) skills

Strategic themes• Broaden US PPP• Expand PPP internationally• Develop investments in wider

class of infrastructure• Optimise value of current UK

portfolio

Finance


Parsons Brinckerhoff – strategic rationale

World-class transportation and power business

Broad geographical footprint

Access to US infrastructure market

Access to developing markets

Integration of group-wide activities


Parsons Brinckerhoff – a game-changing move

Acquisition rounded out capabilities across the infrastructure lifecycle

14,000 employees1, 80 countries

Strong cultural and strategic alignment with Balfour Beatty

Performance ahead of plan and growing order book

Key role as integrator across the infrastructure lifecycle, providing new opportunities for the Group

Notes: 1 Includes approx. 1,500 employees from Heery and BB Management


Opportunities in international infrastructure

Preferred bidder on Eagle commuter rail project, Denver:– engineering, procurement and

construction– rolling stock procurement– systems integration– operations and maintenance

Good prospects for similar schemes across the US

Denver Rail



£460 million contract at Heathrow Terminal 2 – T2BEnhanced range of capabilities through PB’s US resource and expertise

Heathrow Airport



PB has operated in India for a number of years (Metros in Delhi and Mumbai; Delhi airport)

Balfour Beatty joint venture with GVK to bid for road projects on a build/operate/transfer basis

PB provides design and programme management capabilities

India roads



Well-positioned to support nuclear new-build programme

Substantial opportunities in offshore generation and renewable energy

Appointed preferred bidder to acquire and operate Thanet offshore transmission system (OFTO)

UK power


Where we are today

Capabilities across the infrastructure lifecycle and access to wide range of markets and geographies

Continued growth in earnings

Order book increased to £14.6 billion in H1 2010

H2 order book to include recent contracts such as Denver rail, Heathrow T2B and Darnall Army Medical Centre

Strong balance sheet

Resilient business model


Growth opportunities

Significant UK opportunities– New nuclear and

renewables

Plus, opportunities in:– US– South-East Asia– Emerging economies

through PB

Efficiency programme

Confident in ability to deliver growth over the medium-term, reflected in dividend policy


Long-term direction of the Group

Significant growth in professional services

Further growth in US construction

Strong growth in support services

Relative exposure to UK construction to fall

Continued value creation from infrastructure investments


In summary

Creation of powerful position to deliver across the infrastructure lifecycle

Strong, market-leading and mutually reinforcing businesses

Uniquely strong collective capability

Diversification, through markets and geographies, provides resilience and access to more opportunities

Balance sheet strength and strong record of customer delivery

Well-placed to take advantage of long-term demand for infrastructure

Confident about outlook for business

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